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Econ Ch 1
| Term | Definition |
|---|---|
| Scarcity | Our inability to satisfy all our wants. |
| Incentive | A reward that encourages an action or a penalty that discourages one. |
| Economics | The social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices. |
| Microeconomics | A macroeconomist who believes that the economy is self-regulating and that it will normally operate at full employment, provided that monetary policy is not erratic and that the pace of money growth is kept steady. |
| Macroeconomics | The study of the performance of the national economy and the global economy. |
| Goods and services | The objects that people value and produce to satisfy human wants. |
| factors of production | The productive resources used to produce goods and services. |
| land | The “gifts of nature” that we use to produce goods and services. |
| labor | The work time and work effort that people devote to producing goods and services. |
| human capital | The knowledge and skill that people obtain from education, on-the-job training, and work experience. |
| capital | The tools, equipment, buildings, and other constructions that businesses use to produce goods and services. |
| Entrepreneurship | The human resource that organizes the other three factors of production: labor, land, and capital. |
| Rent | The income that land earns. |
| Wages | The income that labor earns. |
| Interest | The income that capital earns. |
| profit | The income earned by entrepreneurship. |
| self-interest | The choices that you think are the best ones available for you are choices made in your self-interest. |
| social interest | Choices that are the best ones for society as a whole. |
| Efficient | Resource use is efficient if it is not possible to make someone better off without making someone else worse off. |
| Globalization | the expansion of international trade, borrowing and lending, and investment. |
| Market Capitalism | an economic system in which individuals own land and capital and are free to buy and sell land, capital, and goods and services in markets. |
| Centrally planned socialism | an economic system in which the government owns all the land and capital, directs workers to jobs, and decides what, how, and for whom to produce. |
| mixed economy | market capitalism with government regulation. |
| tradeoff | A constraint that involves giving up one thing to get something else. |
| Rational Choice | A choice that compares costs and benefits and achieves the greatest benefit over cost for the person making the choice. |
| benefit | The benefit of something is the gain or pleasure that it brings and is determined by preferences. |
| Preferences | A description of a person’s likes and dislikes and the intensity of those feelings. |
| opportunity cost | The highest-valued alternative that we must give up to get something. |
| margin | When a choice is made by comparing a little more of something with its cost, the choice is made at the margin. |
| marginal benefit | The benefit that a person receives from consuming one more unit of a good or service. It is measured as the maximum amount that a person is willing to pay for one more unit of the good or service. |
| marginal cost | The opportunity cost of producing one more unit of a good or service. It is the best alternative forgone. It is calculated as the increase in total cost divided by the increase in output. |
| Positive Statement | what is . It says what is currently believed about the way the world operates. |
| normative statement | what ought to be. It depends on values and cannot be tested. |
| economic model | A description of some aspect of the economic world that includes only those features of the world that are needed for the purpose at hand. |
| financial analyst | studies trends and fluctuations in interest rates and stock and bond prices and tries to predict the cost of borrowing and the returns on investments. |
| budget analyst | keeps track of an organization’s cash flow—its receipts and payments—and prepares budget plans that incorporate predictions of future cash flows. |
| market research analyst | works with data on buying patterns and tries to forecast the likely success of a product and the price that buyers are willing to pay for it. |
| economist | work in private firms, government, and international organizations. |
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